Neil Hartnett

Individual Financial Risk Tolerance and the Global Financial Crisis

type=main xml:id=acfi12053-abs-0001> We investigate individual investors’ tolerance towards financial risk by focusing on changes associated with the global financial crisis (GFC) of 2007–2009. Financial risk tolerance (FRT) is analysed longitudinally controlling for demographic, socio-economic and regional variations. In absolute terms, the change in FRT is small and contrasts with a popular view that risk tolerance is an elastic psychological state overly influenced by the pervading market conditions. Even in the presence of significant financial events, FRT tends to be a reasonably stable attribute in the shorter term but possibly influenced and reshaped by events more gradually over time.

Recognizing the importance of instruction style to students' performance: some observations from laboratory research – a research note

An experiment was undertaken to investigate the relationship between instruction style and student performance. Instruction style was modelled as a multidimensional approachability construct comprising degrees of immediacy and structure. The capacity for an instructor to manipulate perceived approachability is unequivocally demonstrated. The results also revealed an association between student learning outcomes and instruction style. Performance was positively associated with the presence of an instructor vis–à–vis no instructor, and also the degree of instructor approachability. Results also confirmed performance to be positively associated with students ability, negatively associated with students anxiety, but not associated with gender or several other control factors. The importance of task motivation as an important link between instruction style and students performance was explored and some tentative propositions offered. Students motivation varied with instruction style, with higher motivation observed with higher instructor approachability.

The value relevance of earnings forecast disclosures: an investigation of forecast attributes and signalling in the Australian IPO context

Evidence regarding the value relevance of corporate earnings forecast disclosures made during initial public offerings has not been consistent in the literature. This study considers several different attributes of an earnings forecast that might better determine the forecasts value relevance and which could therefore help to explain prior inconsistencies. These emphases include the forecast disclosure itself, the forecast size and the forecast interval. This study analyses forecast disclosures across a sample of 300 companies listing on the Australian Securities Exchange (ASX). Results indicate neither forecast disclosure nor forecast size to be discriminating factors of relevance and this contrasts with earlier studies. Differential value relevance was observed for forecasts with forecast intervals of less than 12 months, vis-à-vis other disclosures. This outcome provides evidence to suggest the dichotomous variable of forecast disclosure/nondisclosure used in prior studies might not always effectively proxy the change in information asymmetry or signalling effects typically proposed in the literature.

Earnings Forecast Disclosures and Their Differential Value Relevance: A Study of Australian Ipos

The value relevance of earnings forecasts disclosed by initial public offerings is not clearly demonstrated in the literature. There also appears scope to further clarify the circumstances in which such relevance might be observed. This paper explores such circumstances and in particular, the extent to which forecast disclosure relevance might be better revealed. We reveal this through the analysis of sample subgroups partitioned according to other specific company characteristics pertinent to firm value. A sample of 300 IPOs was investigated and the results of the whole-sample analysis revealed no significant association between forecast disclosure and IPO value. This non-relevance persisted across sub-samples stratified by business size, retained ownership, growth prospects, underwriter use, auditor quality, listing delay, market activity and industry. However, earnings forecast disclosures were value relevant in the case of IPOs by younger businesses. The results also revealed the persistent value relevance of several key variables across diverse sub-samples and reiterate their importance as control variables. A degree of interaction amongst several other variables, normally considered of interest in the value relevance literature, was also indicated. This is consistent with the proposition that investors place quite different degrees of reliance upon particular factors, depending upon the particular IPO context, with the presence and dominance of some variables serving to moderate the importance of others in each context.

The representativeness of management financial forecasts vis‐à‐vis naïve forecasts

Purpose – This paper aims to extend the research into company financial forecasts by modelling naive earnings forecasts derived from normalised historic accounting data disclosed during Australian initial public offerings (IPOs). It seeks to investigate naive forecast errors and compare them against their management forecast counterparts. It also seeks to investigate determinants of differential error behaviour. Design/methodology/approach – IPOs were sampled and their prospectus forecasts, historic financial data and subsequent actual financial performance were analysed. Directional and absolute forecast error behaviour was analysed using univariate and multivariate techniques. Findings – Systematic factors associated with error behaviour were observed across the management forecasts and the naive forecasts, the most notable being audit quality. In certain circumstances, the naive forecasts performed at least as well as management forecasts. In particular, forecast interval was an important discriminator for accuracy, with the superiority of management forecasts only observed for shorter forecast intervals. Originality/value – The results imply a level of “disclosure management” regarding company IPO forecasts and normalised historic accounting data, with forecast overestimation and error size more extreme in the absence of higher quality third-party monitoring services via the audit process. The results also raise questions regarding the serviceability of normalised historic financial information disclosed in prospectuses, in that many of those data do not appear to enhance the forecasting process, particularly when accompanied by published management forecasts and shorter forecast intervals.